Knowledge that Transforms

Common ownership has raised growing antitrust concerns. We compile a comprehensive dataset of U.S. antitrust litigation cases from the Federal Trade Commission, the Department of Justice, and consumer-initiated lawsuits to shed light on these concerns. We find no robust relationship between common ownership of firm-pairs and the likelihood of these firms being jointly sued. Furthermore, common ownership is negatively associated with potential channels of collusion, such as interlocking directors and competitor-benchmarked executive pay. Evidence from institutional mergers and S&P 500 additions of rival firms supports our main conclusions. Overall, our results offer little support for the view that common ownership promotes explicit collusion.

We estimate the financial and real effects of a subsidy program on imported capital goods recently implemented in China. We identify firms that have access to the subsidy program by combining data on catalogues of eligible products periodically released by the government and product-level import data. Our findings demonstrate that following the implementation of the program, eligible firms experience an increase in borrowing and gain access to loans at lower interest rates compared to non-eligible firms. This improved financial situation enables them to expand their fixed-asset investments, increase total output, and enhance their export performance. The expansion of production capacity also leads to improved investment efficiency and greater profitability. Further analysis reveals that the effects of the policy are particularly pronounced for non-state-owned enterprises and small firms in relatively competitive industries. This finding suggests that these firms face ex-ante financial constraints, and their marginal rate of return to capital is large.

Previous studies show that economic policy uncertainty has been rising steadily since the 1960s (Baker et al. 2014), and that this secular increase has led to harmful economic outcomes such as reduced investment rates (Gulen and Ion 2016). Other studies find that politically connected directors play a unique role in corporate decision making and firm valuation (Goldman, Rocholl, and So 2009). We combine these two lines of research to examine the ability of politically experienced directors (PEDs) to mitigate the harmful investment effects of policy uncertainty. Our results show that the presence of at least one PED on a company board reduces the sensitivity of investment decisions to policy uncertainty by 49% relative to firms without PEDs. These results are stronger when the PED serves on a presidential (as opposed to legislative) committee, and among firms most vulnerable to investment irreversibility. We explore omitted variables bias and instrumental variable estimation in robustness testing to alleviate endogeneity concerns. Overall, our findings align with the theoretical framework of Pastor and Veronesi (2013) and real options theory, and confirm that PEDs can significantly reduce the harmful effects of policy uncertainty.

This paper develops the concept of a “crypto multiplier,” which measures the equilibrium response of a cryptocurrency’s market capitalization to aggregate inflows and outflows of investors’ funds. The crypto multiplier takes high values when a large share of a cryptocurrency’s coins is held as an investment rather than being used as a means of payment. Blockchain data show that the share of coins held for the purpose of making payments is rather small for major cryptocurrencies suggesting large crypto multipliers. Our results highlight the need for market participants to be vigilant when accepting block holdings of a cryptocurrency as collateral or as compensation for seed funding. The crypto multiplier indicates that the liquidation value of block holdings of cryptocurrencies can be substantially below their prevailing market values.

The previous literature finds a positive effect of institutional (relative to other investors’) ownership on firms’ innovation output . We study the impact of increases in the concentration of institutional investors’ ownership on firms’ decisions to invest in innovation and their innovation output. By reducing short-term earnings pressure, concentrated institutional investors’ ownership increases managers’ incentives to invest in R&D. However, it decreases firms’ acquisitions of external innovation due to empire-building and dilution concerns. Overall, firms’ future patents and citations decrease. Our results indicate that the previously found positive effect of institutional investors on innovation declines as the ownership of these investors becomes more concentrated. Despite that, we find that blockholder institutional ownership increases firm value. Hence, large institutional investors take measures to preserve the value of their ownership interests, even if they result in reduced innovation.

Studying a monthly panel of European listed non-financial firms, we document a negative effect of economic policy uncertainty (EPU) on firm value but a positive effect on the valuation premium of founding family firms. These findings are confirmed in a propensity score–matched sample and remain robust to a battery of tests addressing omitted variable bias and measurement error. The lower EPU-sensitivity of founding family firms is concentrated in politically connected firms operating in low-corruption environments. Additional analyses show that founding family firms' valuation premium is more pronounced for R&D-intensive firms with less diversified and less labor-intensive business models. Overall, our results support the view that founding family firms are more resilient to uncertainty and may contribute to economic stability.